TOKYO/SYDNEY – Nikkei was down 12.40% on Monday, as global markets tumbled amid the fear that the United States may be heading for recession – with the losses at one point exceeding the nosedive exceeding the 1987 “Black Monday”.

But it isn’t the Japanese stocks as South Korea’s Kospi shed 8.77% with Taiwan’s benchmark TWWII sliding 8.35%.

On the other hand, ASX 200 in Australia fell by 3.7% while New Zealand’s NZX 50 was down around 1.51%

However, the bloodbath witnessed in stock markets means the safe haven currencies – Japanese yen and Swiss franc – are getting stronger.

By the time this report is being filed around 0900GMT, the dollar was traded for 142.27 yen with the Japanese currency making a gain of 2.866%. The Swiss franc, on the other hand, is up 0.875%.

WHY THE MAYHEM?

Earlier on Friday, the US stocks fell sharply as a much weaker-than-anticipated jobs report for July ignited worries that the economy could be falling into a recession.

The reason why investors are in a “selling mode” is that they want to avoid risk and desperately hoping for US interest rate cuts so that the economy could be revived.

HIGHER INTEREST RATES IN QUESTION

Hence, the latest developments have again made the argument stronger that the delayed US rate cuts by the Federal Reserves resulted in economic stagnation and sent a wrong signal to markets and economies around the globe.

But it isn’t just the US Federal Reserve as international financial institutions like the IMF and the World Bank have also been vigorously advocating monetary tightening. The conditions set for Pakistan under the previous and the yet-to-be finalized IMF program are an example.

That’s why businesses around the world have been calling for lowering the borrowing costs to generate economic activity and employment opportunities.